Earned Value Management – CPI and SPI

Cost Performance Index (CPI) and Schedule Performance Index (SPI) are indicators of how closely accomplished work is on budget and on schedule. CPI shows how many dollars (or other type of currency) worth of work is being accomplished for every dollar spent. SPI shows how the work is progressing compared to the original schedule.

The formula for CPI = EV / AC and the formula for SPI = EV / PV. Both of these formulas begin with Earned Value (EV), which is the value of the work already accomplished. The actual amount of money spent is represented by Actual Cost (AC). Planned Value (PV) is how much we estimate the value to be of the work that we’re planning to do. Another way of thinking about PV is the amount of money we’ve budgeted for the work scheduled at that point in time. If CPI is less than 1.0, the project is over budget; if CPI is more than 1.0, the project is under budget. If SPI is less than 1.0, the project is behind schedule; if SPI is more than 1.0, the project is ahead of schedule.

Earned Value and Design

Here is an example: Carl’s car re-design project has a total budget of $4 million to be spent evenly throughout the one year scheduled to complete the project. The project is now one-fourth completed. So far they have actually spent $2 million, and they have only worked two full months on the project.

What is the AC? It’s 2 million dollars, because that is how much they have actually spent.

What is the EV? It’s 1 million dollars, because 1/4 of the work is done, and 1/4 of the $4 million budget is $1 million.

What is the PV? It’s 2/3 million dollars. There is $4 million to spend evenly over 12 months, so every month they were budgeted to spend 1/3 of one million dollars. They have worked 2 months, so they had planned to spend 2/3 million dollars at this point.

What is the CPI? It’s .50. CPI = EV / AC = $1 million / $2 million = .50 The CPI is less than 1.0, meaning that the project is over budget at this point. They are only getting fifty cents worth of work out of every dollar they are spending.

What is the SPI? It’s 1.50. SPI = EV / PV = $1 million / $2/3 million = 1.50. The SPI is over 1.0, meaning that the project is ahead of schedule by 150% of the planned rate.